Property loss from Dec 2018 Sydney hailstorm up 4% to A$798m: PERILS

The loss impact from a severe hailstorm that struck the Sydney and surrounding area of Australia in December 2018 is now estimated 4% higher at an insurance and reinsurance market loss of A$798 million (around US $550m) by PERILS AG.

PERILS only tracks insured property losses in Australia, hence its final estimate remains well below the overall market wide loss, that includes automotive damage and other lines of business, which were significant factors for insurers in this particular hailstorm event.

PERILS had originally estimated the property market insured loss at A$633 million back in January of this year. It was then updated, rising 21% to A$766 million in June.

The hail storm struck Sydney area on December 20th, as well as further severe storms that hit south-eastern Queensland on 21st and 22nd December 2018.

The majority of the losses reported by insurers were in the greater Sydney area, after the hail storm struck the city, Central Coast and South East Queensland areas of Australia, damaging residential and commercial properties and autos.

As a comparison, the latest loss estimate for the Sydney hail storm alone from the Insurance Council of Australia as of this December is A$1.357 billion, which includes the insured auto damage and other lines.

Commenting on the final update, Darryl Pidcock, Head of PERILS Asia-Pacific, explained, “This is the first Australian hail event for which a market loss footprint, based on loss data collected from affected insurance companies, is available at a postcode level and by property lines of business. The combination of this loss information with PERILS property market sums insured allows users of our data to determine damage degrees as a percentage of sums insured.

“Furthermore, the correlation of these damage degrees with provided hail metrics, based on radar measurements by the Australian Bureau of Meteorology, enables the validation of vulnerability functions used in Cat models. As such, we believe that the Sydney Hailstorms loss footprint will ultimately contribute to a better understanding of hail risk in Australia.”

The Sydney hail event caused losses to some in the reinsurance sector and also some ILS investments. Major player IAG said its claims from this hail storm would drive a loss at least in-line with its maximum first event retention, after taking into account its quota share reinsurance as well.

Suncorp also said its losses would exceed its reinsurance program’s first event retention, triggering a payout, and said the event would eat through its aggregate reinsurance layer retention.

In addition, we had reported that a number of insurance-linked securities (ILS) funds were expecting to experience some loss impacts due to this December 2018 Sydney area hailstorm, through quota share arrangements and collateralized participation in Australian insurer reinsurance programs.